Vision for Private Sector Development in Somalia

“Vision for Private Sector Development in Somalia”

Mogadishu Tech Summit

Dr. Ali Issa, the Executive Director of the National Economic Council (NEC) of Somalia

Salutations. Distinguished Participants: Good morning to you all.

My few remarks at this meeting and on this occasion will focus on the challenges and opportunities of the private sector in Somalia.

At the National Economic Council (NEC) of Somalia, we are currently engaged in developing the “Growth and Economic Transformation Strategy (GETS)” for the nation, based on private sector-led inclusive and sustainable development. The role of the private sector in the proposed strategy is that it should be the primary engine of growth and employment in Somalia.

The principal objective is thus to assess the key challenges facing the operations of the private sector; the opportunities for promotion and facilitation of private sector investments, and generation of a productive employment.

The specific objectives include:

  • What are the current challenges posed by instability, weak institutional and human capacities and how should these be addressed?
  • What are the critical functions of the Government in facilitating and boosting private economic activities; and,
  • How could we build a complimentary approach towards a new vision for private sector development?

The Conventional Wisdom among professional development experts is that for the private investment to be promoted effectively, Governments should create and encourage an enabling environment for growth by reconfiguring the entire policy formulations and implementation processes for the Somali economy.

In the Somali context, the critical enabling conditions simply do not exist including the following:

  • The Private Sector Cannot Develop in Vacuum: in the absence of critical public goods, foremost the rule of law and equal justice. Somalia currently lacks the most basic safety and sanctity of property and assets ownership. Hence, we need to ensure this for domestic investors before aspiring to attract significant long-term direct foreign investments.
  • The lack of state guaranteed security and political stability is therefore an impediment to the attraction of long term investments, instead of quick fix and return trading pursuits.
  • While improving laws and regulations alone will not overcome the main hurdles being faced by enterprises, this is a critical minimum requirement for both domestic and foreign investors.
  • The main employment sectors of the economy (i.e. ‘agriculture, marine resources and other investments) that could interest domestic and foreign investors continue to lag behind expectations and remain hugely underinvested.
  • Trying to foster an enabling environment for the private sector requires considerable investment in basic economic infrastructures—roads and ports, as well as affordable adequate energy and other essential utilities.
  • Public private dialogue is important to strengthen public policy and to improve public and private coordination; but remains weak in Somalia.
  • Public Private Partnerships (PPPs) should be encouraged as the government’s fiscal challenges are likely to remain for the coming years. Similarly, the role of PPP in many sectors should be increased and promoted.

The following specific recommendations should be prioritized to promote and facilitate investments:

  • It is critical that the government considers how best to multiply the impact of key corridors and large investments to jump start and induce small and medium size investments. Building special economic zones such as ICT parks or industrial processing zones for agricultural processing alongside major trade corridors amplifies the impact of such investments.
  • Establishing special economic zones in Somalia can play a critical role in supporting large investments, and in creating centers of excellence in developing export processing zones. Given the lack of capital and capacity in government, private investors built and operated industrial processing zones could be established to increase employment.
  • The development of the financial sector in Somalia remains very much in its infancy, and its limited role in fostering a wide range of lacking financial products demanded by producers, traders and all kind of potential investors must be addressed.
  • Other critical private sector constraints that should be addressed include insecurity, lack of access to permanent and affordable energy, institutional governance weaknesses, and lack of public goods (e.g., roads, ports and internet access.) For these drivers of growth and jobs creation across all productive sectors to materialize, the ‘public goods vacuum’ needs to be filled.
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